District finance staff warns teacher raises will widen FY26 general‑fund deficit

Chief Financial Operations Officer Corey Sassy told the Rapid City Area Schools Board of Education on the district’s Zoom meeting that fiscal year 2026 revenue projections and several compensation scenarios point to a growing general‑fund shortfall.

Sassy said the district is modeling its budget assuming a 1.25% target teacher‑salary increase recommended by the governor and reflected in pending state aid proposals. “At this point, after discussing with the finance committee where we’re at and where we’re going, we’re going to proceed with the assumption that the target teacher salary will increase 1.25%,” Sassy said.

The nut graf: the district projects a year‑over‑year revenue decline driven largely by enrollment decreases and state‑aid changes; that revenue outlook turns several reasonable compensation scenarios into budget deficits. Sassy presented a baseline revenue projection of about $103.7 million for FY26 and then ran expenditure scenarios that showed the general fund moving into deficit even with no systemwide salary increases and growing larger as pay increases rise.

Key facts: Sassy showed a model with no compensation increases that applies a 3% inflation factor to non‑salary categories and projects a deficit of roughly $1.25 million. Applying a 1.25% average teacher‑pay increase (the district is required to meet roughly 97% of the state target) worsens the projected deficit to about $1.88 million. A 1.25% across‑the‑board increase, a 3% increase, and a 5% increase progressively widen the shortfall (Sassy presented figures showing a >$5 million deficit at 5%).

Sassy described the standard approaches for addressing a projected deficit: (1) use reserves in the general fund, (2) execute a flexibility transfer from capital outlay funds (if available), and (3) reduce the budget to match projected revenues, or a combination of those strategies. He noted that capital outlay decisions have downstream impacts on facilities projects and that large transfers could harm long‑term facility plans.

Board members pressed for clarification about next steps. Several trustees said the presentation was timely as negotiations approach. Board member Katie said the finance committee has reviewed the report and that the full board will need to make difficult decisions as recommendations come forward. Board member Christine urged developing an annual process to proactively review capital‑outlay priorities so the board can better evaluate the tradeoffs between operating compensation and facility investments.

The meeting record shows Sassy offered to return with specific recommended allocations for negotiations, and the board signaled they would expect that recommendation before bargaining begins.

Ending: The presentation closes the district’s modeling work for now; Sassy said the numbers will be updated if state legislation changes the target teacher pay or material revenue assumptions. The board will use the scenarios presented to guide forthcoming negotiations and budget‑balancing decisions.